There’s a truism on Wall Street that the fastest way for a company to double its dividend yield is to see its share price cut in half. After all, it’s very rare for a company to aggressively raise their dividend 40% or 50% in a single go, but it’s not uncommon for a dividend payer to see its shares move 40% or 50% downward in the wake of unfortunate news.
Dividend yield is just a function of price and payouts, after all, expressing the last 12 months of distributions as a percentage of the current share price. It’s meant to provide a quick read about how much of your initial investment you can expect back annually – presuming those dividends remain constant, of course.
The following stocks all offer the most generous payouts in the S&P 500 at present. But keep in mind, that’s in part because some have fallen on pretty hard times lately. Furthermore, the yields are based on past payouts and are no guarantee of future distributions. If you’re not afraid of the risks, however, it’s undeniable that these stocks all have tremendous income potential with trailing yields of between 7.1% and 9.8% at current pricing.
| STOCK | TRAILING DIVIDEND YIELD |
| V.F. Corp. (ticker: VFC) | 9.1% |
| Truist Financial Corp. (TFC) | 7.3% |
| Pioneer Natural Resources Co. (PXD) | 9.8% |
| KeyCorp (KEY) | 7.1% |
| Lincoln National Corp. (LNC) | 7.3% |
| AT&T Inc. (T) | 7.6% |
| Verizon Communications Inc. (VZ) | 7.7% |
| Walgreens Boots Alliance Inc. (WBA) | 8.8% |
| Altria Group Inc. (MO) | 8.6% |
V.F. Corp. (VFC)
Trailing dividend yield: 9.1%
Consumer stock V.F. Corp. is the brand behind nameplates including The North Face, Timberland, Vans and Eastpak. It specializes in athletic and outdoor performance wear, but it also caters to higher-end consumers looking for fashionable attire. The company has consistently been paying 30-cent dividends in 2023, but that’s after a significant cut from 51 cents per share previously. The stock price was significantly cut, too, and is down almost 80% from 2021 highs. But with earnings projections of $2.36 per share next fiscal year, the dividends seem very sustainable at the new level – meaning there may be potential here if you can look past VFC’s rocky history.
Truist Financial Corp. (TFC)
Trailing dividend yield: 7.3%
The regional bank formerly known as BB&T Corp., Truist could perhaps benefit from another rebranding based on some ugly recent history. Shares have been nearly cut in half in the wake of the Silicon Valley Bank collapse earlier this year, which was the second-largest bank failure in U.S. history. Credit rating firm Moody’s put the bank on notice for a potential downgrade to its debt status in August, and concerns about its capital position have sparked a $750 million cost-savings plan that will include a “sizable reduction” in staff by the end of the first quarter of 2024. If you don’t mind the volatility recently or like the idea of turnaround stocks, this high-yield financial pick could be on the upswing in the coming months if its restructuring plan indeed bears fruit.
Pioneer Natural Resources Co. (PXD)
Trailing dividend yield: 9.8%
Pioneer is a Texas-based oil and gas production company that pays a variable dividend based on its profitability. That can be disappointing when margins are depressed due to falling energy prices, but the good news lately is that crude oil and natural gas have been on the rise. In fact, the company presented a projection in September stating that oil between $80 and $100 a barrel on average would deliver cumulative free cash flow of about $40 billion over the next five years. That’s a lot of extra cash to fuel that variable dividend. The future remains uncertain, and recent history shows a steep decline in payouts – from their $5.71 paid in December 2022 to $5.58, $3.34 and $1.84 in each successive quarter. However, if oil continues to hold firm at $90 a barrel, we could see that payout trend higher in the quarters to come.
KeyCorp (KEY)
Trailing dividend yield: 7.1%
In August, credit rating firm Moody’s downgraded 10 small and mid-sized banks, partly in response to uncertainty brought on by the failure of Silicon Valley Bank earlier this year. More recently, however, S&P Global downgraded another batch of financial firms – including regional bank KeyCorp. Shares have rebounded from their 52-week lows back in May, however, so apparently many investors have already baked this negativity into the current price. That said, KeyCorp traded for $27 a share in early 2022, so it’s a far cry from prior highs. The dividend yield is still quite substantial, however, and it appears that profits are consistent enough to back up those payments for the near future.
Lincoln National Corp. (LNC)
Trailing dividend yield: 7.3%
Though it offers one of the biggest dividend yields in the S&P 500, at just over $4 billion in market capitalization Lincoln National is one of the smallest stocks in the S&P 500. However, investors who don’t mind a smaller company with a big yield may be interested in this pick. Admittedly a scratch-and-dent special in the financial sector, LNC has large commercial real-estate exposure that has been targeted by two hedge funds. Specifically, this summer saw Mill Hill Capital short Lincoln National’s credit, and Saba Capital has entered into credit default swaps, a derivative that allows investors to profit when a firm sees a debt default. Those are definitely worrisome signs, but despite posting a loss in fiscal year 2022 this firm is back soundly in the black in fiscal year 2023. That may make LNC stock appealing to yield-hungry investors.
AT&T Inc. (T)
Trailing dividend yield: 7.6%
AT&T has gone through a pretty rough patch lately, with shares now trading for roughly half where they were back in 2019. Yes, it embarked on a restructuring in 2022 to streamline its operations, including spinning out its stake in Warner Bros. Discovery (WBD). But the bigger issue is that the debt load of this company still gives many investors pause, as it’s valued at about $100 billion but has nearly $170 billion in total debt. In a rising-interest-rate environment and telecom landscape where upgraded towers and infrastructure are critical to top-tier service, that puts AT&T in a financial bind. Still, its 27.75-cent-per-share dividend remains only about half of its earnings, so there’s a chance the generous yield survives this period of turmoil.
Verizon Communications Inc. (VZ)
Trailing dividend yield: 7.7%
Another telecom that has seen better days, Verizon has suffered through a series of bad headlines over several months that included earnings declines and revenue misses. It also carries a significantly higher level of debt than its current market valuation. But the bottom line is still strong – as is its annual dividend payments to shareholders. It just announced a 66.5 cent dividend that’s payable in October, marking its 17th year of consecutive dividend growth. And that distribution is still less than two-thirds of total earnings, so the payout should be sustainable. There’s certainly risk in this stock and sector in a high interest rate environment, but there’s also a big dividend to help provide some peace of mind.
Walgreens Boots Alliance Inc. (WBA)
Trailing dividend yield: 8.8%
After circling the drain lately, shares of drug store operator Walgreens Boots Alliance are now approaching their lowest levels since 2009. It’s a bit of a head scratcher, too. While it’s true that in-store traffic has tailed off now that COVID-19 motivations are behind us, WBA hasn’t exactly been standing still. The company just tightened its belt by laying off 10% of its corporate staff in July, and in August it announced that it would reduce its position in drug wholesale company Cencora Inc. (COR) – formerly known as AmerisourceBergen – with a $1.85 billion divestment. There are some that fear a dividend cut could be in the works next, but payouts are only about half of projected earnings this fiscal year. If you’re an aggressive bargain hunter, Walgreens Boots may be worth a look based on its tremendous yield.
Altria Group Inc. (MO)
Trailing dividend yield: 8.6%
Altria is down slightly in what has otherwise been a strong year for the rest of Wall Street. From a total return perspective, it still has something to offer investors, however, given its tremendous dividend yield. The tobacco giant behind Marlboro cigarettes, Black & Mild pipe and cigar products, and smokeless tobacco like Copenhagen and Skoal dominates the U.S. market. And while the risks of tobacco are well known, MO knows how to manage its operations well despite the lack of growth potential here. The stock has logged 54 consecutive years of dividend increases, showing its long-term commitment to dividends that may entice buy-and-hold investors.
https://money.usnews.com/investing/dividends/slideshows/high-paying-dividend-stocks-in-the-s-p-500
